Let’s start from the obvious, which is that the ‘cash stuffing’ saving method is in no way new. What is new is its title – in the past, this method was called the ‘envelope system’ – but the fundamentals of it remain the same.
In a nutshell, the cash stuffing system encourages you to physically split your monthly wage into three envelopes, titled:
- Necessities – such as bills, groceries, petrol, and mortgage/rent
- Wants – going out, buying gifts, and so on
- Savings/Debt – setting money aside or paying off any debt you may have
The percentage of your wage which you place into each of these envelopes depends on your expenses, lifestyle, and, of course, how much you earn in the first place. Nevertheless, one of the most popular ways is to put 50% of your wage into the Necessities envelope, 30% in the Wants, and 20% in the Savings/Debt.
So, if you earn a €1,600 net per month, €800 would go towards Needs, €480 into Wants, and €320 into your Savings/Debt.
The benefits of such a system can be multiple: you always live within your means, you always set something aside for a rainy day, and you’re also less likely to spend too much as paying for things in cash will make you think twice about parting with it. Moreover, it makes it harder to impulse-buy off the internet if all your money is in cash, at home.
Nevertheless, there are some obvious pitfalls, too. The main one is that having all your money in cash at home or on your person is not wise. You could lose it, be mugged, or get burgled.
This can be offset by, at least, placing your savings into a savings account at the bank, which also gives you some returns on the money you deposit. Alternatively, you could also use money-saving apps or even an Excel spreadsheet to help you enact the same method without withdrawing all your funds.
Even so, having such a system could help those who struggle with keeping track of their spending and even help you budget better. So, if you’re interested, you could try it out for three months and tweak the percentages to see what works for you.